Recently, in Korea, the role of small and medium enterprises (SMEs) is receiving emphasis as an engine for economic growth. It is a trend that figures prominently in recent policies of the United States and Japan. Furthermore, Germany, which has traditionally had strong SMEs and Finland, currently overcoming the decline of Nokia by activating SMEs, are concentrating their efforts on re-establishing the foundations for growth of SMEs. The recent policies of these countries have something in common as they recognize internationalization as an important element in SME development. Internationalization of SMEs is significant for the national economy as it contributes to export increase, job creation, and globalization and growth of companies. In case of Korean SMEs, they have recently tended to diversify their exports and investment in emerging markets, but the share of exports and FDI of SMEs is shrinking. Therefore, this study assesses recent Korean policies and analyzes the determinants of export and investment of Korean SMEs, and derives implications for Korea based on the analyses of the policies of the aforementioned four countries.
Since 2013, the new government of Korea has been expanding the budget and establishing a support system for SMEs which emphasizes collaboration among institutions to eliminate the inefficiencies with respect to such support. Aside from this, there are also moves to bolster support for entry of these companies into emerging markets. However, there are some limitations (which implies the need for improvement) such as a less-than-uniform supporting systems, lack of assistance based on their stage of internationalization, and breakup of supporting institutions. In addition, lack of industrial diversity in support measures is another important limitation, as support of internationalization of SMEs is mostly focused on manufacturing businesses. More specifically, efficiency of information provision, supporting overseas marketing, customized programs, and various forms of support for overseas expansion should be strengthened. According to the empirical analyses of this study, Korean SMEs currently show lower levels of increase in exports and investment through FTAs compared to large firms, and also more vulnerable to various obstacles such as complexity of foreign countries’ contract and taxation systems, exchange rate volatility, and the geographical distance, etc. In addition, Korean SMEs tend to avoid exporting to countries that have complex customs procedures, and are more likely to export and invest in countries that have relatively low income per capita. This is possibly due to lack of competitiveness of Korean SMEs compared to large companies.
Keeping these results in mind, this study derives policy implications by analyzing SME internationalization policies and the outcomes in the US, Germany, Finland and Japan. First, Korea needs to strengthen the status of policies for internationalization of SMEs, by forming a high-level inter-ministerial committee that determines priorities at the national level and build collaborative mechanism involving all departments. Furthermore, enactment of laws regarding internationalization of SMEs must also be considered to ensure sustainability of policy.
Second, Korea's SME policy needs to focus on expanding the number of exporting companies. It is necessary to provide intensive support to the companies that have begun to export, and to strengthen the step-by-step support starting from preparation and market study to follow-up support. Furthermore, operating countries and regions in the Export Incubator program should be expanded, and support for matching between SMEs and foreign buyers should be strengthened by taking advantage of local consulting firms and Korean Chamber of Commerce in activities abroad.  
Third, support for internationalization of diverse non-manufacturing industries should be increased. In case of the services sector, respective policies are executed by different ministries which lead not only to less uniform support but also to hindrance of connectivity among supporting policies. Furthermore, support for various forms of internationalization is necessary as there is a tendency that internationalization of the service sector is made in different forms aside from direct exports. Therefore, it is required that a collaboration system be established among organizations of each service sector and organizations that can provide internationalization support such as KOTRA and SBC, etc.
Fourth, SME support measures should be provided to companies with competitiveness and strong commitment to internationalization. In particular, technology-intensive industries require longer time to develop products and technologies at the initial stage, and thus the industry has greater needs for a consistent system of support that include a broad range of support measures including technical development, commercialization, marketing, and overseas business. In this respect, establishment of a common support program incorporating projects of related organizations including those organizations that can provide support related to internationalization, technology, and finance; is needed. Korea has recently begun establishing the Creative Economy Innovation Centers in major cities across the country. These centers could serve as an effective SME support platform by providing one-stop support measures including technical development, business startup, overseas expansion, forming business relationship with foreign enterprises, and foreign investment.
Fifth, SME support measures should aim at diversification of overseas markets. Policymakers should not only strengthen its economic cooperation strategy and restructure the system of support measures towards emerging markets in which Korean enterprises have already started doing business, such as China, but also other emerging markets with high growth potential. There are diverse barriers to entering those emerging markets including the difficulty of finding potential overseas customers or partners, developing an effective marketing strategy, securing of human resources, and communication problems due to language barriers. In particular, contacting potential buyers is an important factor in facilitating SME internationalization, thus business matching support through events inviting interested business groups from emerging markets represents an example of an effective support measure.
Another task in strengthening the support for SME internationalization is to enhance SMEs’ access to information by systematically supplying information published by diverse organizations. In addition, Korea needs to develop a mechanism for providing customized information to SMEs based on individual company profiles.
Based on the empirical findings of this study, there is growing demand for legal advisory services from SMEs doing business abroad, and establishment of an official center for support regarding legal matters and regulations could be an option to consider. Korea was designated as a leading country for civil and commercial dispute resolution at the 2009 APEC Summit. Active pursuance of capacity building projects related to creating a legal framework in developing countries will provide an enhanced legal safety net for Korean enterprises as well as harmonization with the domestic legal system.
Furthermore, emphasis should be given to the need for an enhanced overseas network. A solid overseas network could become a vital ‘infrastructure’ for internationalization of SMEs. One of the main tasks in this regard is the formation of an amicable relationship with the local business community. Also, linkage between government and private organizations located overseas needs to be enhanced. In doing so, SME-support agencies should be gathered under one roof to increase access to government support for SMEs. This would also further improve networking among the supporting agencies, thus contributing to a more effective SME supporting mechanism.
Sixth, as forms of SMEs' internationalization become diverse, an integrated support system needs to be established covering exports, FDI and others. In this regard, Korean financial organizations in export/investment need to enhance their international competitiveness. There is also a growing demand for financial support from companies making direct investments. For instance, in case of a company that chooses to invest overseas, especially in developing countries, it is often difficult to secure financial support from local financial agencies. As the legal basis for direct support of domestic company’s overseas business with limited or no domestic foundation is not easily found, we suggest establishing joint bilateral funds with major emerging countries.
Seventh, government efforts to address foreign business and trade barriers are very important in the support of internationalization of SMEs. As confirmed by the empirical analysis in this study, Korean government needs to consistently respond to issues related to foreign exchange fluctuation and make efforts to enhance FTA utilization of SMEs. International cooperation in customs is another area that demands attention. SMEs have high tendency to avoid doing business in regions where customs procedures are complex and difficult. Accordingly, Korea needs to pursue active international cooperation in customs and support emerging countries’ trade facilitation projects. For instance, Korea could lead international efforts toward cooperation on Authorized Economic Operator( AEO) and continue efforts to remove trade barriers through bilateral channels such as FTA negotiations. In addition, Korea should actively put SME related issues on the FTA negotiation table, organize a working group on SMEs to support enterprises doing business in the FTA partner country and pursue bilateral SME cooperation.